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Macroeconomics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn
Edition 20ISBN: 978-0077660772Macroeconomics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn
Edition 20ISBN: 978-0077660772 Exercise 1
What is an opportunity cost? How does the idea relate to the definition of economics? Which of the following decisions would entail the greater opportunity cost: Allocating a square block in the heart of New York City for a surface parking lot or allocating a square block at the edge of a typical suburb for such a lot? Explain.
Explanation
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We can relate Economics with opportunity cost in the following way:
Opportunity cost: To obtain more of one thing, society forgoes the opportunity of getting the benefit from next best thing. This sacrifice is called as the opportunity cost. It can be in the form of money or time. For example: one person has the option of staying at home or going to the party, then, if he opts for going to party; he forgoes the benefit of staying at home taking rest, whereas, if he opts for staying at home, then, he forgoes the delicious food enjoyment that he will get by joining the party. Thus, the person chooses the option that suits him/her.
Economics : it is the social science, which is concerned with how individuals, institutions, and society make optimal (best) choices among available resources.
Our wants are unlimited and the resources to fulfill those wants are limited. So, we are bound to make choices. Every best thing can be obtained by sacrificing other alternative. Thus, in economics we find everything as an opportunity cost.
The opportunity cost of allocating a parking lot is the next best thing than building something else on the same piece of land. A building in New York City may often cost more than the one in suburban area. So, the opportunity cost of building a parking lot in New York may exceeds that in suburb.
Opportunity cost: To obtain more of one thing, society forgoes the opportunity of getting the benefit from next best thing. This sacrifice is called as the opportunity cost. It can be in the form of money or time. For example: one person has the option of staying at home or going to the party, then, if he opts for going to party; he forgoes the benefit of staying at home taking rest, whereas, if he opts for staying at home, then, he forgoes the delicious food enjoyment that he will get by joining the party. Thus, the person chooses the option that suits him/her.
Economics : it is the social science, which is concerned with how individuals, institutions, and society make optimal (best) choices among available resources.
Our wants are unlimited and the resources to fulfill those wants are limited. So, we are bound to make choices. Every best thing can be obtained by sacrificing other alternative. Thus, in economics we find everything as an opportunity cost.
The opportunity cost of allocating a parking lot is the next best thing than building something else on the same piece of land. A building in New York City may often cost more than the one in suburban area. So, the opportunity cost of building a parking lot in New York may exceeds that in suburb.
Macroeconomics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn
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